Inherited IRA Rules: Beneficiary Categories, Distributions, and Taxes

The rules for an inherited IRA depend on two things: who you are in relation to the person who died, and whether that person had reached the age at which they had to start taking their own required withdrawals. Those two facts set your distribution deadline, whether you owe annual minimums along the way, and how much room you have to manage the tax bill. The SECURE Act of 2019 ended the lifetime “stretch” for most non-spouse beneficiaries when the owner died after December 31, 2019, replacing it with a ten-year depletion window, and the IRS finalized the accompanying regulations in 2024.¹

Which Beneficiary Category You Fall Into

Federal law sorts inherited IRA beneficiaries into four groups, and the group you land in decides everything else. Your classification is fixed as of the date of death.

Surviving spouse. The widest set of options, including rolling the money into your own IRA.
Eligible designated beneficiary (EDB). A defined group that includes the owner’s minor children (under 21), disabled individuals, chronically ill individuals, and anyone not more than ten years younger than the deceased.²
Designated beneficiary. Any other individual. Adult children inheriting from a parent almost always land here.
Non-designated beneficiary. Entities rather than people: estates, charities, and trusts that don’t qualify as “see-through” trusts.

Whether the original owner had reached their Required Beginning Date (RBD) also matters. Under SECURE 2.0, the RBD is age 73 for people born between 1951 and 1959, and age 75 for those born in 1960 or later.³

Options for a Surviving Spouse

A surviving spouse can roll the inherited assets into their own IRA. Once rolled over, the account is treated as if it had always been yours: you name new beneficiaries, follow withdrawal rules tied to your own age, and can make new contributions. The catch is that if you’re under 59½ and pull money out, the standard 10% early withdrawal penalty applies because the account is no longer inherited.

Keeping the funds in a separate inherited IRA avoids that problem. Distributions from an inherited IRA are exempt from the 10% penalty regardless of your age.⁴ A younger spouse who might need cash before 59½ often keeps the account inherited, then rolls it into their own IRA after crossing that age.

The owner’s RBD matters here too. If the owner had already started required withdrawals, a spouse who keeps the inherited account must continue them at least at the same pace. A rollover resets the clock to the spouse’s own RBD.

Life Expectancy Withdrawals for Eligible Designated Beneficiaries

EDBs are the only non-spouse individuals who can still stretch withdrawals over their own life expectancy using IRS tables. Smaller annual amounts come out, and the rest keeps growing tax-deferred.

A minor child of the owner uses the life expectancy method only until age 21. At that point, the ten-year rule kicks in and the balance must be gone within ten years of the child’s 21st birthday.¹ This transition applies only to the owner’s own children, not to grandchildren, nieces, or nephews.

Disabled and chronically ill beneficiaries keep the life expectancy method as long as they hold qualifying documentation. Beneficiaries who are not more than ten years younger than the deceased, often a sibling or partner close in age, use the life expectancy method indefinitely.

The Ten-Year Rule for Designated Beneficiaries

If you’re an individual who doesn’t qualify as an EDB, the entire inherited IRA must be emptied by December 31 of the tenth year after the owner’s death.¹ Most adult children inheriting from a parent are in this group.

The ten-year deadline is not the only thing to watch. Whether you also owe annual withdrawals during years one through nine depends on when the owner died relative to their RBD.

Owner died before their RBD: no annual withdrawal is required. You can leave the account alone for nine years and pull everything in year ten if that fits your tax situation. The only hard deadline is full depletion by the end of year ten.
Owner died on or after their RBD: you must take annual withdrawals in years one through nine, calculated from IRS life expectancy tables, and then empty whatever remains by the end of year ten.⁵

The annual withdrawal requirement for post-RBD deaths caused years of confusion, and the IRS waived the penalty for missed distributions through 2024.⁶ That grace period is over. Starting with the 2025 distribution year, the final regulations are fully in effect and missing an annual withdrawal triggers the excise tax.

Estates, Charities, and Non-Qualifying Trusts

When an entity inherits an IRA, the timeline again turns on the owner’s RBD.

If the owner died before their RBD, the account must be fully distributed by December 31 of the fifth year after death. An owner who died in 2025, for example, gives the entity until December 31, 2030. There’s no annual minimum during those five years.⁷

If the owner died on or after their RBD, the entity uses the owner’s remaining single life expectancy to calculate annual withdrawals, reducing the factor by one each year.⁵ For a younger owner who died shortly after reaching their RBD, this can actually run longer than five years.

How Withdrawals Are Taxed

Every distribution from an inherited traditional IRA is ordinary income in the year you receive it. Federal rates for 2026 run from 10% to 37%, with the top rate applying to income above $640,600 for a single filer.⁸ A large lump sum can push you into a higher bracket for that year, which is why many beneficiaries spread withdrawals across the ten-year window.

Inherited Roth IRAs work differently. Contributions came in with after-tax dollars, so withdrawals of contributions and earnings are tax-free as long as the account was open for at least five years before the owner’s death. If the Roth is younger than five years, contributions still come out tax-free, but earnings may be taxable.¹ The same distribution timelines apply to inherited Roth accounts; the amounts just usually aren’t taxed.

One rule covers every inherited IRA regardless of account type: withdrawals to a beneficiary after the owner’s death escape the 10% early withdrawal penalty even if the beneficiary is under 59½.⁴ Income tax on a traditional inherited IRA still applies; only the extra penalty is off the table.

Basis From Non-Deductible Contributions

If the original owner made non-deductible contributions, part of each distribution is a return of already-taxed money. Beneficiaries who don’t track that basis end up paying tax twice on the same dollars. You report taxable and non-taxable portions on Form 8606, and you need a separate Form 8606 for each person you’ve inherited from.⁹ The owner’s most recent Form 8606 shows total basis in the account.

When a Trust Is the Beneficiary

Naming a trust as IRA beneficiary is common in estate plans and creates complications. A trust that doesn’t qualify as a “see-through” trust is treated as a non-designated beneficiary and faces the five-year rule or the owner’s remaining life expectancy, rather than the timelines available to individuals.

Four requirements have to be met for see-through status:

The trust is valid under state law.
The trust is irrevocable, or becomes irrevocable at the owner’s death.
All underlying beneficiaries are identifiable individuals.
A copy of the trust documentation reaches the IRA custodian by October 31 of the year after the owner’s death.¹⁰

When a see-through trust qualifies, the IRS looks through to the individuals underneath and applies distribution rules based on their classifications. If all of them are EDBs, the life expectancy method may apply. If any is a standard designated beneficiary, the ten-year rule governs the whole trust.

The tax math on trust-held inherited IRAs is punishing. Trusts hit the 37% top federal rate at just $16,000 of taxable income in 2026, compared with $640,600 for a single individual.¹¹ Distributions kept inside the trust get compressed into those narrow brackets fast, so trustees often pass income out to beneficiaries to use their wider individual brackets.

Creditor Protection Is Limited

Inherited IRAs don’t get the same federal bankruptcy protection as an IRA you funded yourself. The Supreme Court held in 2014 that inherited IRAs are not “retirement funds” because the account holder can’t contribute, must take withdrawals regardless of age, and can drain the balance at any time without penalty.¹² Creditors can reach the assets in a federal bankruptcy proceeding. A few states protect inherited IRAs under their own laws; most don’t. A spouse who rolls inherited assets into their own IRA regains full federal protection because the account is no longer inherited.

Disclaiming an Inheritance

You aren’t required to accept an inherited IRA. A beneficiary can disclaim all or part of the assets within nine months of the owner’s death, as long as they haven’t already taken any of the funds. A disclaimer is irrevocable. The disclaimed assets pass to the next named beneficiary, or to the estate under the custodian’s default rules if none exists.

Disclaiming can be a planning tool. If an adult child would face the ten-year rule but the contingent beneficiary is a surviving spouse or an EDB with better options, a disclaimer moves the assets to the better tax outcome for the family. The decision is fast and permanent, so it takes advice before it takes action.

Penalties for Missed Withdrawals and How to Request a Waiver

Missing a required distribution triggers a 25% excise tax on the shortfall. Catch and correct the mistake within two years and the penalty drops to 10%.¹³ Either way, the shortfall gets reported on Form 5329, filed with your return for the year you should have taken the withdrawal.

The IRS can waive the penalty entirely when the shortfall was due to a reasonable error and you’re fixing it. To request the waiver, attach a written explanation to your return, complete the relevant lines on Form 5329, and write “RC” plus the shortfall amount on the dotted line next to line 54. Then subtract the amount you’re asking to have waived from the total and pay any remaining tax due.¹⁴ The IRS reviews the explanation and notifies you only if the waiver is denied. Incorrect advice from a financial institution or a death in the family that delayed paperwork are common reasonable-cause scenarios. Filing late with the waiver request beats not filing at all.

1
Internal Revenue Service. Retirement Topics – Beneficiary
2
Office of the Law Revision Counsel. 26 USC 401 – Qualified Pension, Profit-Sharing, and Stock Bonus Plans
3
Congressional Research Service. Required Minimum Distribution (RMD) Rules for Original Owners
4
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
5
Internal Revenue Service. Required Minimum Distributions for IRA Beneficiaries
6
Internal Revenue Service. Notice 2024-35 – Certain Required Minimum Distributions
7
Internal Revenue Service. Publication 590-B – Distributions from Individual Retirement Arrangements (IRAs)
8
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
9
Internal Revenue Service. 2025 Instructions for Form 8606
10
Fidelity. How the SECURE Act Impacts IRAs Left to a Trust
11
Internal Revenue Service. 2026 Form 1041-ES – Estimated Income Tax for Estates and Trusts
12
Justia Law. Clark v. Rameker, 573 U.S. 122 (2014)
13
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
14
Internal Revenue Service. Instructions for Form 5329